BusinessNZ calls caution on banking proposals

BusinessNZ is calling for caution on banking proposals that would increase mortgage costs.

The Reserve Bank is proposing that New Zealand banks should be required to reduce the risk of bank failure to a one-in-200-year event.

The proposals would mean banks having to hold up to $20 billion in additional funds.

BusinessNZ Chief Executive Kirk Hope says the investment required would mean increased mortgage costs for borrowers or credit being rationed by the banks, making financing for businesses and home owners more difficult and expensive.

“Reducing risk always comes at a cost, and we should ensure the costs involved don’t outweigh the risks.

“New Zealand’s risk of bank failure, given the quality of our regulatory systems, would be comparatively low, while the costs to the economy of the proposed requirements could be high.

“BusinessNZ recommends a cost/benefit analysis of the proposals before any further steps are taken.”